JP Morgan Chase started off the banking earnings season with a bang, earning $3.3 billion, or $0.74 per share. Outperforming our estimates on the investment banking side, JP Morgan once again proved its tremendous earning power. While the company remains cautious about the outlook for mortgage losses, delinquencies are starting to decline, which bodes well for the balance of the year. We are raising our fair value estimate to account for the higher-than-expected investment banking revenue and the time value of money since our last update.
The investment bank made nearly $2.5 billion during the quarter, up 30% from the fourth quarter thanks to strong fixed-income and equity markets revenue. Advisory and underwriting revenue was weaker than in the fourth quarter, as expected. We continue to be impressed by JP Morgan's earning power in this business, where its solid reputation continues to pay off in spades, giving it top market share in fees. The first-quarter results amounted to a 25% return on equity in this business line. We remain cautious for the long run, though, as regulators and lawmakers have set their sights on investment banking risk-taking activities.
Outside the investment bank, consumer credit quality is the dominant story--and a good one. Delinquencies in mortgages, across all types and regions, were lower. Management remains cautious, though. The spring selling season is just about to get under way, and certain government supports--like the $8,000 first-time homebuyer credit--are about to be removed. If the housing market falters or unemployment starts to spike upward, losses could start to climb again, keeping the retail business in the red. Despite these legitimate worries, the current trends are positive and may result in JP Morgan's continuing to outperform its stated expectations. On the credit card side, delinquencies were also down, which will probably mean lower losses in the second quarter compared with this quarter's 10.5%. The improvement is coming mainly from the Chase side of the business, as the runoff WaMu cards continue to perform poorly.
JP Morgan presented good news in practically every line of business. Loan losses remain high (a $7 billion provision can attest to that), but the light at the end of the tunnel is starting to shine. The bank is rapidly building capital. Removing the effects of an accounting rule change, the company would have increased its Tier 1 ratio by about 80 basis points in a single quarter; it currently stands at a fat 11.5%. Capital is likely to continue to build rapidly until JP Morgan decides to increase its paltry $0.05 quarterly dividend, an event we eagerly anticipate. However, until the company gets additional guidance from regulators on long-term capital standards and a clearer picture of the regulatory landscape, we are unlikely to see a dividend increase.
